What do Howard Stern and the NFL have in common? Content is king, that's what.
For more than 10 years, I've been explaining that content is king as broadcast television is dying, and today we see that Netflix (NFLX) has truly become the de-facto standard for watching TV and movies as people, young people especially, are increasingly "cutting the cord from cable."
But it's about to get even worse for satellite companies and the traditional broadcast television business model. Why? One of the last bastions of strength for broadcasters is "event programming" like sports, from daily baseball and basketball to weekly NFL games and underscored by the ever-growing one-day audience for the Super Bowl. The NFL makes tens of billions of dollars every year by selling the rights to its games.
Clearly, the broadcast channels like NBC, CBS, Fox and ESPN are then turning around and selling ads for those broadcast games, also generating tens of billions of dollars in revenues and billions in earnings every year.
But as the world's sports fans increasingly consume TV and movies on apps on their smartphones, tablets and TVs, the need to subscribe to a cable package that used to be the only way to get access to those TV shows and movies fades.
I got to thinking about all this yesterday while I was watching the NFL's own Red Zone channel and saw an ad explaining that the best way to catch next Sunday's NFL game between the Buffalo Bills and the Jacksonville Jaguars in London live would be to go to Yahoo.com/NFLStream. You're not going to catch that game on any network or cable channel. And that's a subtle but very important development that will become a trend in coming years.
If the NFL can directly reach billions of people on their smart devices, streaming boxes and smart TVs, why wouldn't they go ahead and cut out the middle man, the broadcast networks? Ten years from now, it's likely we'll all tune in to the Super Bowl on the NFL Android/iOS app using the HD projector in our smartphone (or smartwatch or other small wearable projector device) to stream it live on a 6-by-6-foot clear space on your living room wall. And the NFL itself will eventually be selling subscriptions for direct access to all its content and games and capturing the tens of billions of ad dollars spent from companies advertising in that content.
You already see some of this happening as the NFL Network, NFL Red Zone and other major sports leagues create their own cable subscription networks and increasingly stream their product (games included) on apps and websites.
It's this very concept that has always kept me wanting to invest in content owners, rather than distributors. Netflix, with all its original programming plus the app platform, is both.
This same concept applies to, say, Howard Stern on SiriusXM (SIRI). Howard makes tens of millions of dollars every year from his contract with SiriusXM. But SiriusXM is clearly making more than that from selling subscriptions to and ads around Stern's content. But what happens in 10 years when every new car sold comes with your choice of Android or iOS dashboard control centers tied to 6G wireless? Will Howard Stern need to be part of a bigger package of SiriusXM or will you simply use the Howard Stern app and he/his team will keep all the spoils? Maybe it'll be something in between, where you can subscribe to Stern's shows directly or you can get them as part of the SiriusXM package. The flipside of all this analysis is that there remains value in being part of a larger base of content. For every Howard Stern, there's a million less-popular radio shock jocks and podcasters.
Either way, you'll be using wireless 6G (or whatever the current flavor in wireless data broadband evolution we're in at the time) rather than the lower-quality satellite signal. And that coming change probably puts SiriusXM's model and its huge costs on satellite broadcasting in trouble in the same way that traditional cable/broadcast companies are in trouble.
Some conclusions then: Stick with companies like Netflix that are investing in their apps (and original content) because the future for all forms of media increasingly will center around apps rather than sites, channels or stations. Stick with content owners like Sony (SNE) or Lions Gate (LGF). Keep investing in the smart-device platforms like Google's (GOOGL) Android and Apple's (AAPL) iOS. Stay away from (or maybe get short) satellite broadcasters of all sorts from DISH Network (DISH) to AT&T (T) to Sirius XM. And if you're a content creator like I am, make sure you have your own app on Android and iOS like I do for TradingWithCody. (Google and Apple are part of TheStreet's Action Alerts PLUS portfolio. AT&T is part of the Dividend Stock Advisor portfolio.)
Also, since there's not even any risk from concussion lawsuits (and I say this as a guy who loves to listen to Howard Stern's live shows and rebroadcasts of his Sternthology), don't buy into any future NFL IPO but make sure you invest in the Stern IPO if he ever comes public.